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The Best Indicators For Crypto Trading

Trading is complex and may require a trader to use advanced tools to make money consistently. Like forex, the market can also get volatile, meaning that you can lose your investment if you are not careful. Also, you may need to use a strategy to help you know where to place your money. Of course, a few people have made money trading blindly. Such people may be considered lucky, but luck will not always follow them.

Indicators thus refer to pointers that help a trader predict how the market will behave. They show the price patterns, trends and could be used to devise strategies to exploit the patterns. Indicators help to keep a trader posted on news and general price movements in the market.

There are many indicators that crypto traders can utilize in trading. But not all indicators will be helpful, so some have taken the traditional indicators and customized them to become one of The Best Indicator for Crypto Trading. You may need to sample them and use those that give the desired results. Below are some of the commonly used indicators:

1. Moving Average Convergence Divergence

It is popularly referred to as MACD and is a formula that indicates momentum. It can be calculated by looking at the exponential moving averages (EMA).  The 12 periods EMA is subtracted from 26 periods EMA.  If it returns a positive MACD, it is a sign of an upward trend. The MACD will slope upwards, and if it crosses the signal line, it is a bullish trend that signals traders to buy the asset. But if it returns a negative answer, it implies that MCD is negative, indicating a downside momentum.

The MACD will then slope downward, and when it crosses the signal line. It then reveals a bearish trend and presents a trader with an opportunity to sell.

2. BSI ( Bitcoin Strength indicator)

It is another worthwhile indicator that could be used to determine the direction in which an asset is moving. It is based on the fact that digital assets operate on blockchains, and so it envisages that bitcoin moving parts are visible. So analysts can look at this info and determine the health status of a network. It also looks at variables such as active addresses, net unrealized profits and balances in profit. It combines technical analysis with on-chain metrics. So far, it is believed to be a leading indicator for trading. Traders that use the indicators will always be ahead of the pack and have the tool to help them exploit market volatility to make a profit. It gives the following insights:

  • Short term trend- to help traders discern the prevailing trends
  • On chain, sentiment= helps in tracking sentiments
  • BSI cloud for gauging the strength of any momentum
  • RSI (relative strength)

It is a technical indicator that measures the strength of dynamics, including the price of an asset. It can be used to determine oversold and overbought conditions. It ranges from 0-100, with 50 being the midline that separates the bullish and bearish conditions.

When RSI rises above 50, it is bullish, and when it falls below 50, it is bearish. It means that an RSI above 70 is overbought, and so it is considered bearish. When it is less than 30, it is oversold and is believed to be bullish.

3. Bollinger Bands

The indicator determines the movement of an asset price within the band. When the price hits the lower and the upper band, it signals that a price reversal is in the offing.

Final Thoughts

Of course, there are many other indicators that crypto traders use. But they are just technical analysis tools that help traders predict the direction of price movement. A few traders may opt to track news (fundamental analysis), while others will use indicators. Some still opt to combine the two. Whatever strategy you use, it could help you trade profitably.

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